AAR Reports Second Quarter Fiscal Year 2021 Results
Second quarter sales of $404 million, down 28% from the prior year reflecting the impact of COVID-19Second quarter GAAP diluted earnings per share from continuing operations of $0.41Adjusted diluted earnings per share from continuing operations of $0.31, which excludes the impact of CARES Act support and other itemsCash flow from operating activities from continuing operations of $28 millionWOOD DALE, Ill., Dec. 17, 2020 (GLOBE NEWSWIRE) — AAR CORP. (NYSE: AIR) today reported second quarter Fiscal Year 2021 consolidated sales of $403.6 million and income from continuing operations of $14.4 million, or $0.41 per diluted share. For the second quarter of the prior year, the Company reported sales of $560.9 million and income from continuing operations of $20.1 million, or $0.57 per diluted share. Our adjusted diluted earnings per share from continuing operations in the second quarter of Fiscal Year 2021 were $0.31 compared to $0.64 in the second quarter of the prior year. Current quarter results included net pretax adjustments of $4.7 million, or $0.10 per share, primarily related to the exclusion of CARES Act support partially offset by contract restructuring and exit costs.Consolidated second quarter sales decreased 28% from the prior year quarter. Our consolidated sales to commercial customers decreased 48% from the prior year quarter primarily due to the continued impact of COVID-19. Our consolidated sales to government customers increased 13% due to strong performance on existing government contracts.Sales to government and defense customers were 52% of consolidated sales compared to 33% in the prior year’s quarter reflecting growth from government contract awards and the continued impact of COVID-19 on commercial volumes.Gross profit margins increased to 17.2% in the current quarter from 15.3% in the prior year quarter due primarily to the CARES Act payroll support. Gross profit margins also increased sequentially from 12.1% in the first quarter primarily due to improved operating efficiencies.During the quarter, we were awarded a five-year, $148.4 million follow-on contract by the Naval Air Systems Command to perform contractor logistics services for the U.S. Navy’s C-40A fleet. This expanded award introduces additional services including new operating sites, commercial line maintenance and scheduled engine overhauls, which reinforce our role as a trusted partner applying commercial best practices to provide quality and value to our government customers.Subsequent to the end of the quarter, we announced several new contract awards including:Exclusive seven-year partnership with Fortress Transportation and Infrastructure Investors to manage the teardown, repair, marketing and sales from its growing CFM56 engine pool which currently totals over 200 enginesTen-year agreement with Honeywell to be the sole licensee for component repair and overhaul services for its suite of Electronic Bleed Air Systems on the B737 MAX aircraftExtension of our agreement with Viasat to provide logistics, repair and aftermarket management services for its in-flight connectivity productsThree-year Airinmar agreement to provide aircraft warranty solutions for Volaris, Mexico’s leading domestic airline“The actions we have taken over the past three quarters during the pandemic drove a meaningful sequential improvement to our margins in a stable revenue environment. We expect the combination of our improved operating efficiency, growth from new business wins, and the commercial market recovery will continue to drive margin expansion,” said John M. Holmes, President and Chief Executive Officer of AAR CORP.Selling, general and administrative expenses decreased to $43.4 million from $57.1 million reflecting the impact of our actions to reduce both our fixed and variable cost structure. As a percentage of sales, selling, general and administrative expenses were 10.8% for the quarter compared to 10.2% last year as a result of the significant decrease in commercial sales more than offsetting the favorable impact from the cost reduction actions.Net interest expense for the quarter was $1.3 million compared to $1.8 million last year. Average diluted share count was 35.0 million in both the current and prior year quarters.Cash flow provided by operating activities from continuing operations was $27.6 million during the current quarter compared to cash flow of $19.9 million in the prior year quarter. Excluding our accounts receivable financing program, our cash flow provided by operating activities from continuing operations was $34.4 million in the current quarter compared to cash flow of $20.4 million in the prior year quarter.Holmes concluded, “As a result of the strength of our government business, significant cost reductions and our focus on managing working capital, we have generated cash and preserved our low cost debt capital structure despite the impact of COVID-19 on our commercial business. Additionally, the funds received under the CARES Act have allowed us to retain our skilled workforce. We believe our strong balance sheet and the increased customer focus on our lower cost, value-add solutions will enable us to continue to capitalize on growth opportunities as the commercial market recovers.”Conference Call InformationAAR will hold its quarterly conference call at 3:45 p.m. CT on December 17, 2020. The conference call can be accessed by calling 866-802-4322 from inside the U.S. or +1-703-639-1319 from outside the U.S. A replay of the conference call will also be available by calling 855-859-2056 from inside the U.S. or +1-404-537-3406 from outside the U.S. (access code 7094273). The replay will be available from 7:15 p.m. CT on December 17, 2020 until 10:59 p.m. CT on December 22, 2020.About AARAAR is a global aerospace and defense aftermarket solutions company with operations in over 20 countries. Headquartered in the Chicago area, AAR supports commercial and government customers through two operating segments: Aviation Services and Expeditionary Services. AAR’s Aviation Services include parts supply; OEM solutions; integrated solutions; maintenance, repair, overhaul; and engineering. AAR’s Expeditionary Services include mobility systems operations. Additional information can be found at www.aarcorp.com.Contact: Dylan Wolin – Vice President, Strategic & Corporate Development and Treasurer | (630) 227-2017 | dylan.wolin@aarcorp.com
AAR CORP. and Subsidiaries
AAR CORP. and Subsidiaries
AAR CORP. and Subsidiaries
AAR CORP. and Subsidiaries
Adjusted income from continuing operations, adjusted diluted earnings per share from continuing operations, adjusted operating income, adjusted operating income margin, adjusted sales, adjusted selling, general, and administrative expenses, adjusted cash flow from provided by (used in) operating activities from continuing operations, adjusted EBITDA, and net debt are “non-GAAP financial measures” as defined in Regulation G of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We believe these non-GAAP financial measures are relevant and useful for investors as they illustrate our actual operating performance unaffected by the impact of certain items. When reviewed in conjunction with our GAAP results and the accompanying reconciliations, we believe these non-GAAP financial measures provide additional information that is useful to gain an understanding of the factors and trends affecting our business and provide a means by which to compare our operating performance against that of other companies in the industries we compete. These non-GAAP measures should be considered as a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with GAAP. Adjusted EBITDA is income from continuing operations before interest income (expense), other income (expense), income taxes, depreciation and amortization, stock-based compensation and other items of an unusual nature including but not limited to business divestitures, workforce actions, subsidies and costs, impairment charges, facility consolidation and repositioning costs, investigation and remediation compliance costs, and significant customer events such as early terminations, contract restructurings, and bankruptcies.Pursuant to the requirements of Regulation G of the Exchange Act, we are providing the following tables that reconcile the above mentioned non-GAAP financial measures to the most directly comparable GAAP financial measures:(a) All adjustments are presented net of applicable income taxes.(a) All adjustments are presented net of applicable income taxes.
